JIM LEHRER: We go first tonight to a Newsmaker interview with Treasury Secretary Robert Rubin about the U.S. economy, interest rates, and the stock market, but also about Asia, from where he has just returned. His trip included a stop in Vietnam, thus becoming the highest U.S. economic official to visit that nation since the end of the Vietnam War. Sec. Rubin joins us from the Old Executive Office Building. Mr. Secretary, welcome.

ROBERT RUBIN, Secretary of the Treasury: Nice to be with you again, Jim.

JIM LEHRER: And welcome home.

SEC. ROBERT RUBIN: And it’s also nice to be home.

JIM LEHRER: All right. Why did you go to Vietnam?

SEC. ROBERT RUBIN: Well, we had a very specific purpose which was to try to get agreement with the Vietnamese government pursuant to which Vietnam will be repaying debts that have been incurred prior to the war. And I think it’s a very important step. It really is. It is a step on the process of economic normalization with the United States, and this was a good move, a good step forward for both of our countries.

JIM LEHRER: Why was it important to the United States that Vietnam pay this money back?

SEC. ROBERT RUBIN: Well, partly there’s some money involved–

JIM LEHRER: Sure.

SEC. ROBERT RUBIN: About $150 million. But I think it was something much beyond that. I think it was a commitment on the part of the Vietnamese government to meeting their obligation and doing the kinds of things that governments do if they’re going to be responsible members of the global economy. So I think the primary importance really was that symbolic importance.

JIM LEHRER: But this–weren’t these debts incurred by the old South Vietnam, rather than the North Vietnam, the people who actually won the war?

SEC. ROBERT RUBIN: Well, but these debts were incurred, yes, either all or most of them were incurred in South Vietnam, but Vietnam, as you know, is now one country, and it was our view that the one country that is Vietnam should be committed to paying the debts of the whole Vietnam. You know, it’s very similar in some respects to what Alexander Hamilton did right after the American Revolutionary War. The then central government in the United States had a debt, but he took on the debt of the states that have been incurred during the Revolutionary War, although there was no legal obligation to do so. And he did so because he wanted to establish the creditworthiness of the new United States in what was then the global marketplace.

JIM LEHRER: So you read this as an important thing. And what is it that Vietnam, what kind of relationship does Vietnam want to have with the United States?

SEC. ROBERT RUBIN: Jim, it was really a remarkable experience. I met with the general secretary of the Communist Party. I met with the prime minister, and I met with the finance minister, and what they wanted to talk about was how do you establish–remember, it’s still a Communist country. These are the people who fought the war and run the country. They wanted to talk about how do they move to a market economy, what are the things they have to do? What does it mean to be a market economy?

JIM LEHRER: And they’re asking you this?

SEC. ROBERT RUBIN: Oh, yeah. That’s what this was about. Now, they have made–let me quickly say–they have made a number of steps in this direction, and they really have made quite a bit of progress, but there’s an enormous amount left to do. One of them was, I thought, made a very perceptive observation. That is, he said, you know, we don’t have people in our government who know very much about market economies. We not only have to figure out what to do, but we really have to understand what it means to be a competitive economy; what it means to have market institutions. And they are looking to the United States clearly more than anybody–anyplace else to help bring them this kind of expertise and guidance.

JIM LEHRER: I mean, they’re looking for advice. They’re not looking for aid. They’re not looking for U.S. companies to come in there. They’re not looking for you to help ’em get all of that stuff?

SEC. ROBERT RUBIN: All of the above.

JIM LEHRER: Okay.

SEC. ROBERT RUBIN: They have the largest IDA program. That’s, as you know, the World Bank concession, concessionary window. They have the largest IDA only program in the world right now. In fact, I visited one of the World Bank’s sites, and it was very interesting. It was a school, elementary school kids, and it was very exciting to see what good uses are being made of the international money that is coming into Vietnam. But they want all of that. They want financial resources, but they also want people who can bring to them an understanding of how to–what kinds of institutions or structures they need to make a market economy work, and they certainly want investment by American companies.

JIM LEHRER: Did you give them any kind of–did you make a deal with them of any kind?

SEC. ROBERT RUBIN: The only deal that we were there to make was to sign the debt deal, which I think was a very important step forward. We did discuss the various other steps that will be taken with respect to economic normalization, MFN, Export Import Bank.

JIM LEHRER: That’s most favored nation. Do they want that? SEC. ROBERT RUBIN: Oh, they very much want to have a trade agreement with the United States. About two or three weeks ago, Jim, we delivered our draft of a trade agreement. Now we’re waiting to hear back from them. They want most favored nation status, which, as you know, is a trading status with the United States that almost all of the countries in the world have. And there are various other kinds of institutional arrangements they would like to have with the United States government.

JIM LEHRER: Yeah. Mr. Secretary, did you get into any discussion with them about, hey, wait a minute, if you want to have a free market economy it’s going to be hard to do with a dictatorship?

SEC. ROBERT RUBIN: Well, I didn’t discuss it with them that directly, but it sort of came up on the edges of the conversation from time to time. And I did make the point that market economies have a tendency to lead also to other ramifications in the society. And although we never had a direct discussion of it, you could sort of see that those are the kinds of things that were also on their minds as they were thinking their way through this. But one of the things that struck me in this conversation, as I say, it was really a remarkable experience to have had, was how committed they are to establishing a true market economy.

JIM LEHRER: What’s driving that, do you think, Mr. Secretary?

SEC. ROBERT RUBIN: I think they looked around the world and what they’ve seen is that their Asian neighbors that have done so well–and so many of them have done so well over the last twenty, thirty, or forty years–have done so around what I sometimes think of a new consensus. And the new consensus is basically market-based economies or macroeconomic responsibility, responsible fiscal policy, moving toward open trade, open markets, effective capital markets. They’ve seen it work across Asia. They’ve seen it work. In fact, one of them mentioned to me that they’ve looked at Latin American economies, and they’ve seen that new consensuses is working in many countries and Latin America, and they want to have a successful economy.

JIM LEHRER: Now, we know what they want out of this. What does the United States want out of this relationship?

SEC. ROBERT RUBIN: Oh, I think, Jim, that it is enormously in our interest to have an economically successful Vietnam. If Vietnam with its 70 million people is successful economically, obviously it’s good for Vietnam, but it also means that we will have a large new market with which to trade and to export our goods, and I think it will also increase political stability in the area. Something over 40 percent of America’s exports go to developing countries. And a lot of those countries have reached the point where they become good markets for the United States because of these systems that we and the World Bank and the International Monetary Fund have given them in becoming market economies.

JIM LEHRER: Did you pick up any ill residue, for want of a better term, from the Vietnam War in your discussions with them that is in the way of a new relationship between the United States and them?

SEC. ROBERT RUBIN: You know, I really didn’t. As you know, Jim, our No. 1 priority with respect to Vietnam is to have accountability with respect to POW’s and MIA’s, and I visited our facility there, and the colonel in charge of it, Col. Chase, said the Vietnamese government is cooperating extremely well. Obviously, the war is part of the histories between our two countries, but the whole sense I had was of a country that wants to move beyond the war and of a country that enormously values its relationship with the United States.

JIM LEHRER: Did you talk about that with them?

SEC. ROBERT RUBIN: I didn’t talk about the war directly with the leaders but once again occasionally it would creep into the conversation in one way or another, and you could see that it is sort of there, but it’s not there in a negative sense. It’s there as part of a history, but as part of a history that they really want to move beyond.

JIM LEHRER: Speaking of history, what’s the story about–they wanted you to go to a war crimes museum, and you–you said, no thanks, is that true?

SEC. ROBERT RUBIN: There was the possibility at one point of going to a war crimes–what they call a war crimes museum–but we had a very limited amount of time, Jim, and we tried to use it in ways that we thought–we thought were best. We visited the POW/MIA facility, as I said. I had a fascinating time with–at a Fulbright facility that’s being run by Harvard and with Fulbright money, and they’re not students–well, they’re students, but mostly people who are in their thirties, and they work in various provincial governments in Vietnam, and they’re trying to learn how to run a market economy. And it was a wonderfully interesting interchange, and I was very impressed at the sophistication of these people and their questions, how much they have learned and how far they have gone in figuring out what needs to be done.

JIM LEHRER: So you now have returned to Washington. Is there something that you now have to do, or you feel you must do to honor not necessarily a commitment but a feeling that you left there with?

SEC. ROBERT RUBIN: Yeah. I left the–that’s actually a very good question. I’ve thought about it forever myself. I met with a group of American business people who were doing business in Vietnam, and it was very interesting what they said. They said the Vietnam people are extremely hard working; that if they don’t get their work done during the day, they take it home at night; that they place a tremendous priority on education; that they’re ambitious; they’re intense; and ultimately that’s–it’s those characteristics of a population that I think are the most important things with respect to economic success. I think the potential of this country economically over a period of time is really very great. What I’m going to do now that I’m back is try to help work here to expedite the various steps that need to be taken in the path of normalization, of economic normalization. The other thing I would love to do, Jim, but I don’t know quite how to do it, although I spend a lot of time trying to do it, is to continue to try to impress on Congress the enormous importance of the World Bank and these developing countries and the tremendous contribution it makes. And I’m going to try to urge–and I said earlier in the show I did visit a World Bank site, and it was a very impressive thing to see–so I’m going to continue to urge that the members of Congress focus on the importance of the World Bank and the sister institutions to countries like this, and their growth and development, and the development of the kinds of market-based economies we believe in.

JIM LEHRER: Okay. Look, now that you’re back home, quickly some questions about some back-home things. Yesterday, while you were gone, just as you were arriving back, Speaker Gingrich, for instance, proposed eliminating capital gains and the estate taxes. Will you and the President buy that?

SEC. ROBERT RUBIN: Jim, we have a tax reduction program. It’s moderate. It’s carefully targeted. It focuses on education, on savings, and on child care primarily, tax relief for middle income families, incentives for the kinds of activity that will contribute to future productivity. That’s our program. Obviously in the discussions we’re going to wind up having with the Republicans we’re going to have to sort out the differences between our programs and theirs. I would say on Speaker Gingrich’s suggestions that they are enormously expensive, in addition to having in my judgment very serious policy questions. I don’t think that either one of them makes a great deal of sense in a policy sense. In addition to that they are enormously expensive.

JIM LEHRER: So that’s enough?

SEC. ROBERT RUBIN: I guess, Jim, that I do not see how you could fit either of those proposals into a balanced budget even if you wanted to. And in terms of policies, it doesn’t seem to me that that’s where we should wind up.

JIM LEHRER: Hard work left to be done between the administration and the Republican Congress to come to a meeting of minds on a balanced budget, right?

SEC. ROBERT RUBIN: There is a lot of work to do. My own instinct is to think, yes, there is a lot of work to do, and of the ups and downs. My own instinct is to think that in the fullness of time we’ll get there because it’s so important to do it, and I think the American people feel that importance, having just experienced four years during which a very successful deficit reduction program, the President’s, has contributed enormously to the economy. Whether we can get it done quickly or not is I think another question, and there are no guarantees in life.

JIM LEHRER: On the economy, Mr. Secretary, all the indicators are showing the U.S. economy is really doing very well. We had a segment on it here the other night while you were gone. Is it doing too well, too fast?

SEC. ROBERT RUBIN: I don’t think I would put it that way, Jim. I think that we are doing very well. We’ve clearly–at least in my view–the most likely outlook is the continuation of solid growth and low inflation. I do not believe I’m ahead, that we would be in this position if we had not put in place the program of 1993, and I think that’s one reason why the balanced budget program with sensible priorities is so important. But we’ll have our ups and downs, and I think we’re on a good path.

JIM LEHRER: Yeah. I know you don’t like to second guess the Fed, but what did you think of the decision a couple of weeks ago to raise interest rates? Was that good for the economy?

SEC. ROBERT RUBIN: Let me break it into two pieces, if I may. As you say, I don’t like to second guess, and, in fact, will not publicly second guess the Fed because I think that I’ll respect the independence of the Fed who really has contributed to the credibility of our marketplace, and that, in turn, I think has led to lower interest rates, has obviously of course contributed to lower interest rates, which is obviously good for the economy.

JIM LEHRER: And its independence from you and the President is part of that in terms of credibility, is that what you’re saying?

SEC. ROBERT RUBIN: I really believe that. I believe an independent Fed is really a very important part of how our economy works. I do think, however, let me just say–

JIM LEHRER: Okay.

SEC. ROBERT RUBIN: –that the interest rates that really drive the economy are the intermediate and long-term interest rates, those are set by the market, and they’re going to reflect inflationary expectations independently, well, I shouldn’t say independently but in some fair measure I believe at least independently of what the Fed does.

JIM LEHRER: All right. One more thing, and that’s the stock market has had a lot of ups and downs recently. How do you read that?

SEC. ROBERT RUBIN: Well, I never comment on the level of the market, or what I think it’s going to do, and I don’t think a Secretary of the Treasury should, but over time I think that markets follow fundamentals, and we have had very good economic conditions in this country for the last four years, and I think the outlook is good. The other question, though, that I think you do have to ask is whether the market is properly valued, with respect to a favorable outlook for conditions, even if you have a favorable outlook, or is it overvalued or undervalued? And I’m not going to attempt to respond to that question, but I do think that’s a question that every investor has to look at with great–with great care, as well as the question of what conditions are likely to be.

JIM LEHRER: How important is it, Mr. Secretary, as a measurement of the health of the U.S. economy? The stock market goes up today; the stock market goes down today–big deal, small deal in terms of the economy?

SEC. ROBERT RUBIN: In my view?

JIM LEHRER: Yes.

SEC. ROBERT RUBIN: The kind of fluctuations that we’ve seen in the last say few months I think it is somewhere in the neighborhood of irrelevant. If you’re looking–if you’re asking me, do I think it’s a barometer of economic health–

JIM LEHRER: Right. That’s what I mean. That’s what I mean.

SEC. ROBERT RUBIN: Well, I think it’s in the neighborhood of irrelevant.

JIM LEHRER: Okay. Well, with that one we will leave it. Mr. Secretary, again, welcome home, and thank you very much.

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